Shumate, Jr. v. Concept Special Risks Ltd. Inc.

Filing 42

ORDER ADOPTING MEMORANDUM AND RECOMMENDATIONS re: 34 Memorandum and Recommendations, granting 29 MOTION to Dismiss In Part Plaintiff's Texas Based Claims for Failure to State a Claim (Signed by Judge Nelva Gonzales Ramos) Parties notified.(lcayce, 2)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION

January 11, 2016
David J. Bradley, Clerk

FRANK THOMAS SHUMATE, JR.,

§
§
Plaintiff,
§
VS.
§ CIVIL ACTION NO. 2:14-CV-385
§
CONCEPT SPECIAL RISKS LTD, INC.; §
fka OSPREY SPECIAL RISK LIMITED, et §
al,
§
§
Defendants.
§
ORDER ADOPTING MEMORANDUM AND RECOMMENDATION
Pending is Defendants’, Great Lakes Reinsurance (UK), PLC and Concept Special
Risks Limited, Motion to Dismiss, in Part, Plaintiff’s Texas Based Claims for Failure to
State a Claim pursuant to Federal Rule of Civil Procedure 12(b)(6). D.E. 29. Plaintiff
seeks a declaratory judgment for coverage under a policy of marine insurance for
damages allegedly sustained to his vessel. D.E. 5, p. 1. Plaintiff asserted numerous
causes of action in his complaint, including claims under the Texas Insurance Code and a
claim for attorney’s fees under Texas law. D.E. 5, pp. 7-8. Defendants move to dismiss
these claims arising under Texas law because the choice of law provision in the insurance
contract subjects any disputes to the substantive laws of the State of New York (D.E. 29,
p. 2). Plaintiff argues that the choice of law provision is unenforceable and that the laws
of the State of Texas should apply (D.E. 30, p. 2).

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On August 3, 2015, United States Magistrate Judge Jason B. Libby issued a
Memorandum and Recommendation (M&R) (D.E. 34) recommending that Defendants’
Motion to Dismiss, in Part, be granted, and that Plaintiff be allowed to amend his
complaint to raise New York state law claims. Plaintiff filed objections (D.E. 37) to the
M&R and Defendants filed a response (D.E. 38) to the objections.
First, Plaintiff objects to “the Magistrate’s finding because the wrong standard was
used in deciding Defendant’s 12(b)(6) Motion to Dismiss.” D.E. 37, p. 1. Plaintiff
asserts that the Magistrate Judge failed to indulge all inferences in his favor regarding the
substantial relationship analysis because the Magistrate decided facts “giving more
weight to evidence offered by the Defendants by taking Defendants’ explanation for its
failure to accept service as adequate proof of a substantial relationship with New York.”
Id. at 2.
“Under federal maritime choice of law rules, contractual choice of law provisions
are generally recognized as valid and enforceable.” Great Lakes Reinsurance (UK) PLC
v. Durham Auctions, Inc., 585 F.3d 236, 242 (5th Cir. 2009). In the context of a marine
insurance contract, a choice of law provision will be upheld in the absence of evidence
that its enforcement would be unreasonable or unjust. Id.
The Magistrate Judge’s recommendation was based on the general presumption of
the validity of choice of law clauses and Fifth Circuit precedent addressing this particular
choice of law clause as it relates to Defendants and their substantial relationship with
New York. This Court finds no error in the Magistrate Judge’s analysis, and Plaintiff’s
first objection is OVERRULED.
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Plaintiff’s second objection to the M&R alleges that the Magistrate Judge
erroneously considered extrinsic evidence attached to Defendants’ motion, and thus
converted Defendants’ 12(b)(6) motion into a summary judgment motion in error. D.E.
37, p. 2. Plaintiff objects to the statement in the M&R that “Defendant maintains its
agent for service of process and its trust account in New York.” (D.E. 34, p. 8). The only
attachment to Defendants’ motion is a copy of the insurance policy (D.E. 29-1), which
makes no mention of a trust account in New York, but does state that Defendant Great
Lakes maintains its agent for service of process in New York. (D.E. 29-1, p. 16) This
insurance policy was attached to Plaintiff’s Second Amended Complaint (D.E. 5-1) and
thus can be considered by the Court. The statement regarding a trust account references a
5th Circuit case involving Great Lakes. The Magistrate Judge did not improperly convert
the motion to dismiss to a motion for summary judgment. Accordingly, Plaintiff’s
second objection is OVERRULED.
Having reviewed the findings of fact, conclusions of law, and recommendations
set forth in the Magistrate Judge’s Memorandum and Recommendation, as well as
Plaintiff’s objections, and all other relevant documents in the record, and having made a
de novo disposition of the portions of the Magistrate Judge’s Memorandum and
Recommendation

to

which

objections

were

specifically

directed,

the

Court

OVERRULES Plaintiff’s objections and ADOPTS as its own the findings and
conclusions of the Magistrate Judge.

Accordingly, Defendants’ motion to dismiss

Plaintiff’s claims under Texas law (D.E. 29) is GRANTED.

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Further, the Court

GRANTS Plaintiff leave to amend his complaint, if he wishes to do so. Plaintiff is
ORDERED to file any amended complaint within seven days of this order.
ORDERED this 11th day of January, 2016.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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